In the digital era, incumbent organizations are challenged by new market entrants, lean organizations without legacy being able to launch more quickly new business models, products and services. Innovation is a key organizational capability the following three core elements are the foundation of a successful digital innovation.
Deloitte and Spencer Stuart wrote a paper on digital leadership for managers within the technology, media and telecommunications (TMT) industry. The found that the three core elements of successful digital innovation are:
1. Strategy & vision
2. Environment & culture
3. Organisation & design of work
4. Leadership & talent
On page 13 the paper zooms in on the power of silos:
Often when we work with organisations we hear executives bemoaning the existence of silos. They are seen as getting in the way of effective working. Whilst we have some sympathy with this perspective, we believe that silos are fundamental to successful organisations and to successful innovation. Silos – and the deep well springs of expertise and technical knowledge that they contain – are fundamental to a company’s capability, without which, meaningful innovation is impossible. Silos facilitate the development of deep technical or functional expertise. It is this expertise that allows for idea generation.
I don’t see the connection between idea generation, deep functional expertise and silo’ing an organization. Not having silos doesn’t mean to be all over the place, or having shallow expertise. To me it's not so much about the silo "entity" itself, but how the interact throughout the organization.
The following, cross-silo working, cross collaboration is the point the paper sees as thriving:
Create structures to cut across the silos
Of course what is critical is finding ways to make cross-silo working happen effectively – you want the crashing together of ideas from different disciplines; the challenge that comes from people from different disciplines interacting. Cross-silo working has to be built in to innovation initiatives from the very start. Creativity thrives through the process of cross-pollination and co-operation, the coming together of distinct disciplines and traditions to create something new.
We believe that exactly this, creating unique combinations, as Schumpeter said, adds value to the business.
How are these unique combinations formed and sustained?
That’s where leadership and –the war for- talent comes in. Non-conformism to certain employee “models” enables to create teams of different types of people, enabling the clash of creativity and new idea generation which is different and competitive measured against competitors and industry. The last is important to understand and is really the benchmark and relates back to the first paragraph of this article, being lean and adaptive.
Understanding the industry and their legacy, it’s exactly that environment where unique combinations and enabling digital leadership make the difference. Digital leaders will need to put the advantages that they have to work, being more lean in organizational structure, enabling culture with uniquely combined teams that achieve the clearly defined strategy that nurtures and launches innovations.
I don’t know much about the background of Nike+’s digital sports innovation in terms of leadership, culture and structure, but their broadening of the business, from production to service (servitization) is a great example of an existing organization adapting to the possibilities of digital.